JP Morgan May Have Looked Like a Wild Old Man But He Saved Uncle Sam Bailed Out the Nation Several Times

While the numbers are not as large…not the $700 billion to $800 Biillion that the banking bailout became in 2008-09, the other numbers are not as large either. The Dow Jones Industrial Average fell 39% in 1907. On this date in 2008, the market had lost and gained about two percent over the previous month and politicians ran around making comparisons to the Great Depression when a comparison to 1907 might have been a better barometer . In order to equal the fall of the 1907 panic, the Dow that was around 11,015 on September 22, 2008 would have had to fall to 7000 and it was on this date in 2008 that the Dow fell some 300 points and arguably didn’t stop falling until March 9, 2009 when the Dow Jones Industrial Average bottomed out at 6547. So, while it was, and in some measure still is, an extremely difficult and precarious situation, it was not totally unprecedented and it wasn’t necessarily a good match with the Great Depression. It’s just the depression of the 1930’s is all the general public, politicians and most people in the media know about. Several times in the past, it was JP Morgan engineering a bailout with some government help and this time it was the Federal Reserve and Uncle Sam engineering a bailout with some other private help. When you hear also of rumors that today’s problem was a plot by those who stand to profit, keep in mind that in 1907 it was rumored that the banks had caused the whole panic just to line their pockets. Aside from the Great Depression, there were a bunch of “panics” in financial circles and the resultant recessions or depressions that came fairly regularly…perhaps too regularly. The Dow is currently in a trading range between about 9900 and 10,70o and, in recent days, there has been a declaration that the recession is over.

Year

Unemployment rate

1923-1929

3.3

1930

8.9

1931

15.9

1932

23.6

1933

24.9

1934

21.7

1935

20.1

1936

17.0

1937

14.3

1938

19.0

1939

17.2

1940

14.6

1941

9.9

1942

4.7

With unemployment still hovering near 10%, the rebound of the stock market and the claim that the recession is over are by no means a guarantee that the market and economy won’t go back in the tank. Nevertheless, both are, and especially the Dow Jones, are certainly at a different place than anyone in March 2009 could have foreseen. If something happens that causes a big drop in stock prices again, then maybe we can start to refer to the Great Depression as it relates to the stock market, which is but one indicator. Unemployment is pretty bad but its more like the late 1970s and early 1980’s, not the 1930’s.

No Hoovervilles Today Like in 1930

The big thing about the Great Depression is that its depths were so far reaching that it led to new regulation by the government into financial markets than had ever been contemplated by the founders or anyone else in an effort to try to control the economy such that these setbacks wouldn’t be so deep or so frequent. To a large degree, it has worked pretty well but to expect these things to never happen or think its some sinister plot just is to not accept reality.

Sometimes, news people say they need to give commentary to “give perspective” or a particular news event. Dan Rather used to defend journalists providing analysis instead of just reporting for that specific reason. Yet, it helps if those giving “analysis and perspective” had some perspective in the first place. It’s probably hyperbole and just outright ignorance that media types or politicians trot out the Great Depression comparison. I remember when President Clinton was running for his first term against George H. W. Bush, they said then that it was the worst economy since the Great Depression. It certainly wasn’t even close to the economy of the Great Depression then and it’s arguably not the same now. It’s probably best to leave that moniker on the shelf until its truly warranted. Let’s hope it can stay on the shelf and we can call this the great recovery. Some of us need a job, not panic.

Weather Bottom Line: We will continue with this mid to upper 90’s nonsense through Friday. A front will be approaching then and will pass through. As it does so, our rain chances will go up. Trouble is that we are so dry there may not be enough moisture for this guy to give us as much rain as one might ordinarly expect from a strong front. But, it’s a chance. The good thing is that it will knock the mercury down to the upper 70’s to low 80’s for the weekend and it may be the sign of a pattern change. Some models are showing a big ol’ storm dropping down into the central plains and the Ohio Valley by the middle of next week.